All Forum Posts by: Jason Ridout

Thanks for the info @Aaron Breckenridge

I'm not concerned about calculators etc. I just really enjoyed looking up what people were discussing in my area and ended up meeting a lot of great local people on here.

Please add Canadian locations back! Even just one for each province is enough.

Thank you 

Hello from Canada eh! There used to be forums for British Columbia, Vancouver and other parts of Canada, now the only location options are for the US.

Many parts of real estate investing are very region specific, especially if it's another country. Unfortunately this site has lost major value to me if I can't connect with people in my area regarding our market. 

Admin, can Provinces be added to the locations?

Other members, is there an alternative forum for Canada?

Hi @James Ma, it is getting harder by the day. Very limited inventory and getting worse not that we're getting into winter. 

I'm still finding the odd deal, but it's tough. 

There's a decent duplex that's been converted to 4 plex in Port Alberni that would cashflow, but that's about it, lol. 

The tricky part is finding properties that are either vacant, or at fully market rent. Most properties are very under rented and don't perform well unless rents can be increased.

Thanks @Wendell Fong! 

The deals are getting harder to find, but there's a few that still work. There's really low inventory right now which is making it very competitive. You need to be able to think outside the box a bit.

As @Julie Toh mentioned, off market deals can work, but it's tricky to find someone willing to sell in this market. 

I do know of a couple of properties that work, but it depends on your criteria.

Some sellers like to "chase the market up". 

They might think it was worth $3m a year ago, but with the climbing market they think it should be worth more now. 

Sometimes sellers think they have a treasure, but it's just another house.

Hi @Adrian Masterskaya

Wholesaling isn't really a thing in BC. The BC Financial Services Authority (formerly the Real Estate Council of BC) has rules in place restricting the assignment of real estate contracts. You can no longer get a house under contract and sell that contract for a profit, without consent from the original seller. If you get written permission from the seller it can still be done, but most sellers won't sign off on that if there's no benefit to them. It still happens from time to time but mostly on commercial real estate. 

Pre-sale apartments can offer good returns, but we're in a crazy inflation market right now. If you were to tie up a pre-sale, and while it's under construction the market takes a downward turn, you're going to be at a loss. This is really no different than doing a flip and seeing the market take a downward swing mid rehab. 

Converting commercial buildings into residential use could be a real money maker. It would require a rezoning and approval from local municipalities. Obviously the conversion would require meeting all building codes which might be challenging depending on the building. Most municipalities are in favour of more residential housing, so this might be a solid idea.

Investing for cashflow in isolated communities isn't much of a challenge really. You just need to find a decent property manager in the area. If you need to do any renovations to the property, a contractor might be difficult to find, but if you're willing to pay a premium, you can find one. Vacancy rates are very low everywhere on the island and golf islands. Finding tenants won't be a challenge. I recently placed tenants in Youbou, and had a lot of response to the ad for the unit.

I think some of the smaller communities are under valued right now and a good place to find cashflow and potential appreciation.

Feel free to reach out if you have any other questions

Just so everyone is on the same page, this thread is posted in the British Columbia forum. We have very different tax structures here. Section 121 exemptions and 1031 exchanges don't translate into Canada. Anything IRS related is likely not relevant. 

If you're looking to invest in real estate on the West coast of BC, you're probably assuming that house prices have been pushed beyond a point that allows cashflow with a traditional 80% LTV mortgage.

It is getting more difficult to find cashflow, but I thought I'd share my recent experiences to reduce some of the discouragement that investors are experiencing.

If you're using quick math (like the 1% rule) to analyze properties, I suggest doing the long math on a few properties to see if you're writing off properties too quickly. For those of you unfamiliar with the 1% rule, it suggests if you can get 1% of the purchase price per month, it'll cashflow. However, I'm finding cashflow even lower than 0.5%. 

I've worked on 3 deals in the last month that were very expensive houses and most people would assume at the high purchase price, there's no way they would cashflow. The purchases were in the Nanaimo area on Vancouver Island. The prices were $840,000, $870,000 and $953,000.

I'll use the $870,000 property as an example. The house was built in 1993 and is in good condition in a good area (B neighbourhood). It's a 2 story house with a basement suite. (2,600 sqft). 

The vacancy rate is extremely low and rents in the area have climbed drastically in the last year. The top floor, with access to the garage will generate $2,600/m + utilities and the suite will generate $1,600 + utilities.

$4,200 total income
-$500/ property tax
-$200/m insurance
-$150/m maintenance
-$100/m city utilities (water/sewer)
-$210/m 5% vacancy (even 5% is overkill)
-$2,500/m mortgage ($700k @ 2%)

=$540/m cashflow - Even if you wanted to have a property manager at 10% the property would still be cashflow positive.

This property only generates 0.47% of the purchase price per month (nowhere near the 1% rule) but still cashflows. 

There are still obstacles buying in a market where many houses are nearing the $1m mark. The required downpayment is more than many people can afford. There's also the large mortgage payment you'd need to be able to float if the property sits empty for a month or two.

The advantage to the high price market is you can invest a large amount of capital in one investment which mean less maintenance/tenant management. Buying 2 houses with suites for $450,000 each means 4 tenants to manage, 2 roofs, 4 sets of appliances etc. You'll be paying off a $700,000 mortgage in one asset instead of buying two or three houses for cheaper to get the same amount of equity accumulation.

Real estate prices are climbing and a lot of investors see the houses they used to buy for $500k-$600K go up to $700k-$800k and think there's no way the deals can work with the higher prices. 

I'm just here to say, don't give up! Rents have increased and cashflow deals still exist!

 Buying something that has negative cashflow has a lot of negative drawbacks. 

It's not scaleable. If you're paying $500 a month out of your own pocket for a property, how many of those types of properties can you buy?

It makes the property hard to hold. Cashflow is what allows you to hold a property through lean times. If you get laid off or there's an economic downturn, cashflow helps you through it. Negative cashflow might force you to sell at a less than ideal time.

All your eggs are also in one basket. You're speculating on appreciation. If the market stays flat for 5, 8 or 10 years (which isn't uncommon) you have to hold the property, otherwise you'll likely sell at a loss. 

The reason I like investing in real estate is it has built in ways to protect your capital. When you have multiple sources of wealth generation, you can weather most storms and have multiple exit strategies. If you buy for cashflow, odds of losing money are very very low. If you just speculate on appreciation you're at the mercy of the market.

It's probably better to buy a property with negative cashflow than no property at all, but I wouldn't have been able to build a decent portfolio if I had accepted negative cashflow.

Nanaimo Real Estate Investment Group is having its August meetup at the Cavollotti Lodge. Come network with local investors and get some tips about the current market and strategies. 

Open to people new to investing that are looking to learn, experienced investors looking to network and everyone in between!